Speaking to ET Now, Mishra said the move has been fiscally neutral, with no additional borrowing planned by either the Centre or states.
“There is no direct fiscal implication from the GST rate cuts. Much of it is funded through the compensation cess, and neither the central nor state governments have raised their borrowing targets,” Mishra explained.
He added that while headline consolidation in FY25 was around 80 basis points, an additional 50 bps came from repaying past compensation loans, creating room for the current rationalisation.
Government to maintain focus on infrastructure capex
Mishra said the government’s infrastructure push remains the top fiscal priority, with no indication of expenditure cuts.
“The focus on infrastructure buildout will continue. As budget discussions begin, capex will remain the central theme for supporting growth,” he said.He expects the government to maintain its balance between capital expenditure (capex) and revenue expenditure (revex) to sustain medium-term growth.
Oil price rise manageable, no long-term economic shock
On the geopolitical front, Mishra downplayed the risk of sustained oil price shocks due to fresh Russia sanctions and U.S. policy moves.
He estimated that every $10 per barrel rise in crude oil adds about $17–18 billion to India’s import bill, equivalent to 0.4–0.5% of GDP.
“Given that last year’s average was above $70, the current price movement from $61–62 is not a drag. I don’t expect crude to sustain above $80 because the global economy cannot absorb it,” he noted.
“This is more a bargaining tactic from President Trump and should be temporary.”
Mishra expects oil prices to remain range-bound and not threaten India’s growth outlook.
Trade deficit surge due to seasonal gold imports
Addressing concerns about the widening trade deficit, Mishra clarified that the spike was primarily driven by seasonal gold imports ahead of Diwali rather than structural weakness in exports.“Of the $7 billion year-on-year increase in the deficit, $6 billion was due to gold imports. The implied tonnage is far above the historical average, so this should normalise in coming months,” he said.
He expects India’s current account deficit (CAD) to remain around 1% of GDP, well within comfort levels.
India at the start of a cyclical growth recovery
Mishra said India is now entering a new business cycle, led by lower fiscal consolidation, recovering credit growth, and monetary easing.
“FY25 saw an effective 130 bps of fiscal tightening and a sharp slowdown in credit growth—from 16.3% in March 2024 to 9.8% in May 2025. Now, both are turning around,” he explained.
“As growth revives, imports will rise, but so will capital flows, making the CAD manageable.”
He noted that India’s capital inflows are linked to growth momentum, not interest rate differentials, adding that investor sentiment will improve as data confirms recovery.
Global investors misjudging India’s growth story
Mishra also highlighted that some global investors have wrongly categorised India as an “AI loser” compared to Taiwan and South Korea, leading to temporary outflows.
“Funds have been reallocating to AI-heavy markets like Korea and Taiwan. But this is short-sighted. As India’s growth revival becomes evident, those flows will return,” he said.
He believes India remains one of the few major economies with structural growth potential and a stable policy environment, making it an attractive long-term investment destination.
Exports may rebound as tariff impact fades
On export trends, Mishra said the current softness is due to the temporary impact of U.S. tariffs, but Indian exporters are adapting quickly by diversifying markets.
“These are resilient businesses. The trade diversion effect means the long-term impact will be much smaller than headline numbers suggest,” he said.
He expects exports to stabilize in the second half of the fiscal year as trade negotiations progress and global demand recovers.
Outlook: Growth to strengthen by March 2026
Summing up, Mishra said India’s growth trajectory is poised to accelerate by the end of this fiscal year.
“By March, the exit growth rate will be significantly higher than current levels. Fiscal space, improving credit, and strong infrastructure momentum will support this recovery,” he concluded.